Clean coal 'unviable for two decades'

There will be no business case for developing clean-coal power plants in Australia or overseas in the next 20 years, according to a key Federal Government adviser.

National Low Emissions Coal Council chairman Dick Wells says even the introduction of a carbon price in July will not entice the coal industry to invest the billions required for clean-coal plants because it makes no financial sense and punishes shareholders.

He says carbon capture and storage (CCS) will not play a major role in combating dangerous climate change unless the Gillard Government dramatically increases industry assistance.

"If you want to wait for the carbon price to rise to levels where these will be commercially viable we're probably into the 2030s," Mr Wells said.

"The question is how you fix that financial gap. How do you get the biggest bang for the buck for taxpayers' dollars in filling that gap?

"Because in the absence of it, companies with shareholders - I mean, people have their superannuation with these companies - aren't going to do things which aren't sensible commercially."

Clean coal clouded

This is the second half of a two-part investigation by Michael Atkin into carbon capture and storage, and Australia's role in funding it.

'Not serious'

Carbon capture and storage has been lauded as having the potential to reduce Australia's carbon emissions by 20 per cent and to supply a quarter of Australia's electricity by 2050.

The Gillard Government has a $1.68 billion CCS Flagships program to get major projects off the ground and the coal industry's Coal 21 fund has committed $289 million to projects so far.

But the potential of CCS remains largely unfulfilled.

"We're a long way off it (the 2050 targets)," Mr Wells said.

"It is a really critical stage for the deployment of these technologies, but if we don't start to get some big projects to be put into place in the 2020s, the role of CCS in actually meeting those sorts of targets in 2050 won't be achieved."

The National Low Emissions Coal Council estimates $10 billion to $17 billion is required to have one industrial-scale, clean-coal power station and a portfolio of smaller projects operating commercially by 2020.

"Not all of that funding is from the Commonwealth Government," Mr Wells said.

"I mean, the funding was always a partnership with the states and industry but certainly there is more money to be found. I think we would recognise that when you come down to a project deal there may be additional ask on governments and that's the facts."

Mr Wells says it is not just the level of funding that needs to change.

"We're living with a whole lot of policies which favour renewables, which impinge on the markets and what we've been forced to do is argue for measures which are specific to carbon capture and storage which is not our preferred way of doing it," he said.

Joseph Romm, a senior fellow at the Centre for American Progress, warns the lack of investment could have serious implications for coal-reliant countries like Australia.

"There is certainly no question that governments and the coal industry aren't serious about this right now," Dr Romm said.

What is carbon capture and storage?

CCS is a technology that attempts to prevent large quantities of CO2 from being released into the atmosphere.

"I actually think it's suicidal for the coal industry because the coal industry's only hope for the long term is that carbon capture and storage be developed."

Critics point to the fact that no-one has successfully demonstrated a commercial clean-coal plant using CCS technology anywhere in the world.

But Mr Wells is adamant it is not a matter of 'if' but 'when'.

"These technologies do work and will be implemented at some stage - but using them in an integrated way on the scale we want, we need to do that under Australian conditions to satisfy ourselves about the technical viability in Australia," he said.

Global CCS Institute chief executive Brad Page says the technology is close to being proven.

"We have two plants under construction right now: one in Canada, one in the USA," he said.

"You're going to find in the next two years that at very large scale we actually do have those technologies proven, demonstrated and in operation. That's a great achievement that we are now building those plants and they are going to go into production."

However, last year was tough for CCS, with 11 major projects hitting the wall worldwide. Two Australian clean-coal power projects - Queensland's ZeroGen and Wandoan - have recently been scrapped or placed on hold.

One senior industry insider points the finger at the ZeroGen collapse for putting the brakes on the industry.

"There is a disparity in government policy because CCS is going to work in the future, so it's a shame that the momentum has been lost," the insider said.

"The ZeroGen car crash has really taken CCS backwards because it's knocked the confidence out of everyone."

Policy setbacks

The CCS Flagships program originally had deeper pockets, with $2 billion pledged. However, its funding was reduced to $1.68 billion last year.

Four projects have been shortlisted for funding but only two remain viable - the Collie South West Hub in Western Australia and the CarbonNet project in Victoria's La Trobe Valley.

Just $57.26 million has been spent so far but Mr Wells defends the need to move slowly.

"I don't think there is any embarrassment about not spending the money too fast," he said.

"Whilst I'm frustrated because we want to get things done, at the same time we need to balance with that doing it prudently."

But world-leading CCS expert Peter Cook believes the structure of the CCS Flagships program, under which projects compete for funding, has led to poor outcomes.

"It has slowed things down, it has decreased cooperation and that in turn has slowed things down further," Dr Cook said.

"Can we turn this around? Well, I mean the competitions are under way but we need to have a fresh look at this with a view to getting things underway more speedily and cost effectively."

Recent decisions have gone against the CCS industry. The Gillard Government has abandoned a promise to make new coal-fired power plants CCS-ready and the technology was excluded from the $10 billion Clean Energy Finance Corporation.

Behind closed doors, Mr Wells told the Federal Government it was a major blow.

"We've expressed our concern and disappointment," he said.

"We didn't put out press releases but we certainly made our views plain within government that we didn't think that was a good way to go.

"CCS is one of a portfolio of low-emissions technologies that this country is going to need to provide for energy security and meet growing energy demand whilst lowering emissions. The fact that it is left out sends the wrong message."

The Global Institute's Brad Page says while the decisions did not help the industry, CCS faces larger hurdles.

"Would it have been better to have access to the Clean Energy Finance fund? Well, possibly so. But in fact complexity in the business case for many of these technologies at the moment and the issues that businesses face go well beyond those measures."

Resources Minister Martin Ferguson was unavailable for an interview.

Editor's note: An earlier version of this article said Resources Minister Martin Ferguson had declined requests for an interview. In fact, Mr Ferguson made himself available for a live interview with ABC1's 7.30 last week, but it did not fit into the schedule. Mr Ferguson declined to do a pre-recorded interview.